Waiting for poverty to strike is no game. It makes ordinary men and women helpless, desperate and scared. "If you look at it mathematically, there is no way out: we will just never be able to repay our bills to the EU and IMF," said Haris Christou, one young Cypriot speaking for his compatriots. "Am I afraid? Of course I am afraid. Everybody knows everything in Cyprus is going to get bad, really bad. And nobody knows where exactly we are headed."

On Wednesday night men and women, some young, some old, gave voice to that fear. They gathered outside the offices of the European commission, and then lined the road that leads up to Cyprus's colonial-era presidential palace, to protest against a rescue programme that, wittingly or not, will destroy their country's banking sector and bring its economy to its knees.

"Out with the troika", "Fuck the troika", "Go home Troika", said the placards. "No to the policies of austerity." "No to privatisations." "No to the memorandum of catastrophe."

But more than words, or any amount of hoarse chanting, it is uncertainty that now speaks loudest in Cyprus. The uncertainty that has come with the knowledge that the island's economic output will shrink dramatically as a result of the austerity now being demanded in return for €10bn in aid. The uncertainty unleashed by policies that will see many Cypriots wake up with much less than they once had in the bank. And the insecurity of suddenly being the subject of capital controls that possibly could change Cypriots' lives for years....I, too, would be inclined to withdraw all my funds from any Cyprus bank and I suspect there will be a run on them. There are 'policies in place' to restrict such a run but I don't see how they can prevent people taking out what is their own money. That is the worry. The Russians called it theft and so would any Cypriot who cannot access savings. The safest place to deposit money is still the UK and I'm surprised that London has not offered to make itself a safe haven for Italians, Portuguese and the Spanish to place their life savings. That's what I'd do if I were a Mediterranean saver. The GBP and USD have their moments but nobody will lose a penny by keeping their money in those currencies which are trusted around the world. I don't know how any Cypriot would be able to do a SWIFT transaction to get cash out of harm's way but surely it can be done.

...thousands of trade unionists demonstrated...

As EU leaders gathered in Brussels for the talks, thousands of trade unionists demonstrated behind a police cordon against EU imposed austerity targets outside the summit venue. Figures showed that southern European Mediterranean nations continued to suffer the steepest drops in employment, with fourth quarter employment in Spain, Portugal and Greece dropping 4.5pc, 4.3pc and 6.5pc year-on-year respectively. Mr Barroso insisted that the EU needed to stick to the austerity measures and "reforms that are indispensable for European competitiveness" but conceded that more needed to be done "to promote growth in the short term and to have a reinforced commitment regarding social obligations." "Because in some cases we are reaching the limits of what is socially acceptable, and this is certainly a matter of concern for all of us," he said. During Thursday's summit France, Spain and Portugal will clash with Germany, Holland and Austria over their demand for more time to meet their debt-cutting targets against a growing popular backlash against EU austerity. A draft EU summit text echoes Mr Barroso by calling for an ﾓappropriate mix of expenditure and revenue measuresﾔ, language that France and others will interpret as a loosening of fiscal constraint against resistance from Germany. "We will discuss growth and employment and how to fight the present economic deterioration in Europe," said Mark Rutte, the Dutch Prime Minister and an EU austerity hawk. "At the same time creating a consensus on the fact that we need both to implement the necessary austerity programmes and structural reforms to improve our economies." Europe's leaders fear that an anti-austerity backlash is growing across Europe after Italian elections wiped out mainstream political parties delivering a stunning rejection to Mario Monti, the EUﾒs favoured candidate who only secured one in 10 votes. In a bid to overcome growing public dissent, the draft EU summit text expresses concern about low growth and proposes a "youth employment initiative" that allocates €6 billion for the highest unemployment regions of the EU over the coming seven years - a tiny amount of cash compared to austerity programmes cutting tens of billions. "Six billion will never be enough. I think 60 billion would not have been enough," a senior eurozone official told Reuters. "It is our political response, it is not a response in substance." "The burden has been placed on the people," said Bernadette Segol, the leader of the European Trade Union Confederation. "Unemployment is up and up and up every month, when is the growth going to come? We need investment. We are not dealing with figures, we are dealing with people, who have feelings and votes."

The taboos are falling one by one.

“We must leave the austerity cage,” he told leaders of his Democrat Party (Pd), responding to Italy’s electoral earthquake by tearing up his pre-election programme. “A change of course is absolutely necessary given that five years of austerity and attacks on workers have pushed up public debt levels across Europe,” he said.

“The vicious circle between belt-tightening and recession is putting representative government at risk and making it impossible to govern. The immediate emergency is the real economy and joblessness,” he said. The pledge puts Mr Bersani on a collision course with the ECB, which is constrained from helping to shore up the Italian bond market unless Rome complies with Europe’s austerity agenda. “Italian voters may have effectively voted away the ECB safety net,” said Christian Schulz from Berenberg Bank. The central bank cannot activate its bond purchase programme (OMT) unless Italy requests a rescue from the EMU bail-out fund, and that in turn requires a vote in Germany’s Bundestag.

“The ECB cannot – and will not want to – do anything to help Italy after the inconclusive election result, even if borrowing costs spiral out of control,” he said.

Mr Bersani’s Democrats (Pd) and its allies control the lower house but failed to win the senate. He is hoping for tacit support on a law-by-law basis from the Five Star Movement of comedian Beppe Grillo. Mr Grillo has responded with a volley of anathemas, calling Mr Bersani a relic from a defunct political order that must be swept away by civic revolution. Yet many of his 163 senators and deputies say the movement should seek common ground with the Pd.

Mr Bersani said Italy should mobilize its EU voting weight to push for an EU-wide change of course. He has natural allies in Paris.

French finance minister Pierre Moscovici warned EMU colleagues on Monday that current policies “risk a loss of social and political confidence across Europe. We must not pile austerity on top of recession”. Mr Moscovici said France would need an extra year to meet its deficit target of 3pc of GDP and called for action to tackle the root of the crisis with an EMU-wide growth strategy.

French officials are deeply alarmed by the relentless upward rise in France’s unemployment rate to 10.6pc, or 26.9pc for youth. President Francois Hollande’s popularity ratings have crashed from 55pc to 30pc since his election in May, the fastest decline ever recorded for a French leader.

Italy, France, and Spain toyed with a Latin bloc alliance last year to confront Germany over EMU’s contractionary policy mix, but the initiative faded.

Mr Hollande pulled back from a showdown with Berlin and ultimately pushed through further fiscal cuts and reforms, while Italy’s Mario Monti was never willing to jeopardise the European Project that he served for ten years as a commissioner.

Critics says Mr Monti, whose Civic Choice list won just 10pc of the vote, went native in Brussels long ago and has been slow to understand the deeper political crisis unfolding in Italy.

The outgoing premier gave them fresh ammunition today, saying that it would be better to hold fresh elections than to see an anti-EU government to take power.

It is unclear whether a second vote would achieve what he intends. The latest snap polls show that Mr Grillo’s support is still rising, jumping from 25pc to 28pc.

Ominously, nostalgia for Fascist leader Benito Mussolini has started to emerge as the post-War order crumbles. Two key figures have praised elements of Fascist rule over the last two days.

A leader of the Five Star Movement professed “fascination” with the Fascist sense of the Italian state and the family, while the deputy state secretary of the economy said Mussolini “governed well until 1935.” (source telegraph)

ROME — A brief sampling of politicians’ remarks made on Monday underline how far Italy is from forming a government after last week’s surprisingly inconclusive general election.

“No solution can be reached without the Democratic Party,” Massimo D’Alema, a former prime minister, said in Rome. His party is the lead member of the center-left coalition that won the most votes in the election, which translates into 340 seats in the 615-member Chamber of Deputies, making its support of any prospective government truly indispensable.

Meanwhile, in Palermo, Angelino Alfano said Silvio Berlusconi’s People of Freedom party and the center-right coalition “have emerged as the winners.”  In fact, his party came in third and his coalition second, and will have only 20% of the lower-house seats. But Mr. Alfano sought to make the point that his coalition was surging in polls and saw itself as on course to win the next election.

Ultimately, the next election is what all today’s maneuvering is about.  That’s even more true of the Five-Star Movement, a protest movement led by Beppe Grillo that won more than a quarter of votes and enough seats to make it a potential kingmaker. Mr. Grillo strongly believes he can emerge the outright winner if Italy’s establishment politicians remain true to form and try to govern through an unwieldy coalition. That’s one reason why he is tempted to hope that happens. On Monday, he caustically suggested his rivals opt for a cabinet led by Corrado Passera, a former bank chief executive who served as Mario Monti’s industry minister in the technocratic government that is widely blamed for halfhearted reform efforts that, along with austerity measures required by Europe, led Italy into a prolonged recession.

Stocks are up big to start 2013 but Marc Faber, Editor & Publisher of the Gloom, Boom & Doom Report, says it ends in tears.

"Either the market is going to correct more meaningfully now or we have a shallow correction and a continuously rising market until July or August," Faber told me via phone from Thailand. If stocks don't pullback soon, he says we risk a repeat of 1987 when stocks rallied 40% into summer only to collapse 41% in 2 months.

"In March of 2009 everything looked horrible, now nobody can find a reason why stocks could go down," Faber claims. "We ask that you should buy stocks when everything looks horrible, you shouldn't rush to buy them when everything looks perfect."

The problem is that it's hard to find anyone claiming the environment is perfect. Even the theme running under the reports of "the masses" buying stocks is that it's a cue to sell, not buy.

Analysts are looking for almost no corporate earnings growth in the current quarter and not much better than that for the balance of the year. The idea that Fed money printing is supporting assets may be true, but the FOMC has given clear guidelines on when the printing will stop. When inflation (as measured) rises past 2% or unemployment falls below 6.5% the Fed will raise rates.

Even if you think the Fed is wrong, there's no basis for calling them liars. A surprise end to Quantitative Easing isn't on the table. It's hard to make much of a case for ebullience beyond the fact of stocks much-hyped journey toward all-time highs.

So what's an investor to do? Faber says it's a matter of allocation and perspective. Stocks have gone very far in a relatively short amount of time. If you caught the rally, he says it's time to trim but not bail out entirely. If you're a Johnny-come-lately to stocks, you're too late as he sees it.

"If you have 100% of your money in equities and you just bought them now, maybe you should reassess your position," says Faber.

In a statement released this morning, leaders promised that their fiscal and monetary policies would “not target exchange rates.”

“We, the G7 Ministers and Governors, reaffirm our longstanding commitment to market-determined exchange rates and to consult closely in regard to actions in foreign exchange markets,” said the statement.

“We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates.”

Spelling out the fears that have been raised, particularly by Francois Hollande, the French president, the statement added: “We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will continue to consult closely on exchange markets and cooperate as appropriate.”

Fears of so-called “currency wars” were sparked when Japan's new prime minister Shinzo Abe ordered the country's central bank to be more expansionary. Mr Abe is determined to force down the value of the yen in a bid to boost exports and in turn Japan's sluggish economy.

What an asshole would say ....

Olli Rehn, the European Union's economic and monetary affairs commissioner, today warned that recession-hit Italy must continue to implement economic reforms once the election is decided.

"It's a very fragile situation. Whatever colour the new government in Italy has, it is important that it maintains the course of reform," he told Austria's Profil magazine.

Rehn also cautioned that the growing strength of the euro will hurt countries in southern Europe by causing "problems with their exports to other parts of the world".

Germany and France have clashed over whether EU officials should intervene in currency markets, and Mr Rehn today argued that countries around the world should work more closely together to offset the potential damage caused by currency fluctuations.

"I recognise the risk of competitive devaluation. We have recently warned the government of Japan about corresponding steps towards depreciation of the yen," he said.

"We need reforms in the international monetary system so as to avoid negative influences on international trade. The coordination within the G7, G20 or the IMF should therefore be improved," Mr Rehn added.

As for the EU - well I am "out" - the "performance" since 1973 has been pathetic, and we could do a whole lot better economically ourselves as we proved for over two centuries - although I would not wish for one moment to return to the colonial times. As India and China have shown, it is possible to grow GDP in this environment (check out the EU countries' low comparison base in terms of GDP growth - should be easy to improve upon, one might think...). Comparisons with Norway and Switzerland are not fit for purpose - how about the UK "before" and "after" the EU - in the years when the country's economy was actually being run properly - as opposed to the Wilson/Heath panic mode era..?

A lot of people in mainland Europe are extremely unhappy with the way the EU is run - they could not even get a majority on EU Constitution, for goodness sake - which is why the Lisbon Treaty had to be hastily cooked together. Political over-ambition in Brussels got us to this point, and Europe-wide political incompetence is dragging us back. Time for the populus to speak, and for this cretinous, continued practice of hiring people with no economic background, no qualifications or experience of handling multi-billion pound budgets to run the country to stop immediately. It would be regarded as downright negligent in most listed companies to have such people in charge, and it is utterly unjustifiable when the country's economic welfare is at stake.

A rethink on sovereign governance principles is required, and it needs to start now. Without any pointless bickering about socialiam vs capitalism. We exist in a capitalist society, and not to have our best exponents and experts fully engaged in making the best of this type of environment is a complete nonsense. Removing political parties' right to appoint idiotic, incompetent fools to have a direct say and influence in running the country would be a good start. Let the people elect them based on their cvs and background - i.e. competence and experience - just as the rest of us are judged and evaluated. And that does not mean Chancellors with 3rd Class Honours degrees in Economics, or, as we discovered with the allegedly "bright" Gordon Brown, ex-Economics History graduates, with more awareness about Adam Smith and 18th century economics, (valid though many of those theories may be), than the price of gold on the commodities markets at around the turn of the 21st Century, when Brown sold off all our gold for a song. He would have been fired on the spot for such incompetence in any half-decent business for wilful asset destruction. Or am I being too harsh here...??

The European Central Bank has announced a shake-up of responsibilities among its executive board, putting new arrival Yves Mersch - formerly governor of Luxembourg's central bank - jointly in charge of heading up plans for the eurozone banking union alongside vice president Vitor Constancio.

Hungary's central bank has cut its interest rate - the highest in the EU - for the fifth time in as many months. The Magyar Nemzeti Bank lowered the two-week deposit rate to 5.75pc from 6pc, continuing a trend of lowering the rate by a quarter point every month. The bank's president is due to appear at a news conference this afternoon to explain the decision, which is perceived as risky in the face of high inflation of 5.2pc.

Bloomberg reports that central bank chiefs from across the world are set to meet as early as January 6 to revisit the terms of the Basel III rules drafted in 2010. At the heart of discussion will be requirements on how much liquid capital banks must hold as a proportion of their total balance sheet, which the regulations say should be enough to survive a 30-day credit squeeze. Central bankers, including ECB President Mario Draghi, say could drag down interbank lending, and slow economic recovery.

EU lawmakers have admitted they will fail to meet the globally-agreed January deadline for the implementation of tougher capital requirements on banks. A meeting planned for today to thrash out the final details of a deal after talks last week stopped short of full agreement has been postponed. The move sees the EU join the US in delaying the introduction of the regulation, known as the Basel III rules, which are widely expected to come into force one year later than planned, in January 2014.

Spanish economy minister Luis de Guindos has revealed plans to fully compensate those who lost investments by purchasing complex financial instruments they did not understand. His plans will give the hundreds of thousands of Spaniards misleadingly sold high-risk instruments a chance to claim compensation for the losses which followed the banks' €37bn bail-out.

Winning the war against the people of Europe ...

Europe (Germany in fact) clinched a deal on Thursday to give the European Central Bank new powers to supervise euro zone banks from 2014, embarking on the first step in a new phase of closer integration to help underpin the euro. After more than 14 hours of talks and following months of tortuous negotiations, finance ministers from the European Union’s 27 countries agreed to hand the ECB the authority to directly police at least 150 of the euro zone’s biggest banks and intervene in smaller banks at the first sign of trouble. “This is a big first step for banking union,” EU Commissioner Michel Barnier told a news conference. “The ECB will play the pivotal role, there’s no ambiguity about that.” The euro rose to a session high in Tokyo of 1.3080 against the U.S. dollar on news of the deal. After three years of piecemeal crisis-fighting measures, agreeing on a banking union lays a cornerstone of wider economic union and marks the first concerted attempt to integrate the bloc’s response to problem banks. The new system of supervision should be up and running by March 1, 2014, following talks with the European Parliament, although ministers agreed that could be delayed if the ECB needed longer to prepare itself. The plan sets in motion one of the biggest overhauls of any European banking system since the financial crisis began in mid-2007 with the near collapse of German lender IKB. The focus is now on EU leaders, who meet in Brussels on Thursday and Friday, to give it their full political backing. In an about-turn, German Finance Minister Wolfgang Schaeuble dropped earlier objections that had led him to clash openly with his French counterpart, Pierre Moscovici, last week over the ECB’s role in banking supervision. With time running out to meet a year-end deadline, both sides managed to settle their differences and Germany won concessions to temper the authority of the ECB’s Governing Council over the new supervisor. Agreement on bank surveillance is a crucial first step towards a broader banking union, or common euro zone approach to dealing with failing banks that in recent years dragged down countries such as Ireland and Spain. The next pillar of a banking union would be the creation of a central system to close troubled banks. The decision also sends a strong signal to investors that the euro zone’s 17 members, from powerful Germany to stricken Greece, can pull together to tackle the bloc’s problems.

Heil ....

Germany has asked a panel of top advisers to examine France's economic problems.

Finance minister Wolfgang Schaeuble (pictured, below) has asked its panel of economic advisers, known as the "wise men", to look into France's reform proposals, amid concerns that weaknesses could spread to Germany and the rest of Europe, according to Reuters. More from the newswire:  Schaeuble's request denotes growing concern in Berlin and among private economists over the health of the French economy, which is set to miss a European Union goal for reducing its public deficit next year.

"Concerns are growing given the lack of action of the French government in labour market reforms," Lars Feld, an economist who sits on the panel, told Reuters.

Although Schaeuble raised the prospect of a report on France with members of the council this week, Feld and the finance ministry made clear that the government had not submitted a formal request. The ministry declined comment on the minister's "unofficial discussions" in general.

UPSSSSS....!!!!

Finland and Holland move to block bond-buying plans, casting the first doubts on last week's summit deal, as figures show a slide in Spain, Greece and Italy's manufacturing activity and a rise in unemployment across the eurozone....A little more detail on this German court hearing. Germany's parliament last week approved the ESM, but President Joachim Gauck said he will not sign it into law until the powerful constitutional court has given its go-ahead. Several critics have already filed complaints against the ESM with the court, who will hear these complaints on Tuesday 10 July - one day after the fund is supposed to take effect. Over in Greece, ministers are deep in talks over how to ease the punishing terms of its bailout before a review by the country's lenders. Antonis Samaras, the country's prime minister, wants more time to meet targets and to dilute austerity measures. Reuters reports that ministers from the conservative-led coalition were huddled in talks on Monday to work out the plan before "troika" inspectors from the EU, ECB and IMF begin their review of Greece's faltering progress in fiscal adjustment and reforms.

Angela Merkel, the German chancellor, was asked about this today. She said we must accept decisions of other states and there is no need to make decisions now... Confusion still reigns, it would appear, over whether direct overcapitalization of banks by the eurozone's permanent rescue fund would require a treaty change. Yesterday, the European Commission said no legislative changes were needed in the treaty governing the European Stability Mechanism. But the Dutch government said today it was uncertain if a direct overcapitalization of banks by the euro zone's permanent rescue fund would require a treaty change. For now, however, it was assuming that no treaty change would be needed and, when appropriate, the cabinet would propose that parliament approve the addition to the ESM's mandate.

France's finance minister has said that the country's revised budget, due to go before the cabinet on Wednesday, will rein the government's deficit to a targeted 4.5pc of GDP. ...

Reuters reports that Pierre Moscovici said that without budget amendments the deficit would hit 5.0pc of GDP this year - implying the government needed some €10bn in new deficit cutting measures. 

At the summit of the Group of 20 leading economies in Los Cabos, Mexico, Mr. Rajoy told his counterparts that it was necessary to "break the link between risk in the banking sector and the sovereign risk," a Spanish official said. Officials in Brussels cautioned the momentum hasn't moved in favor of making such far-reaching changes to the Spanish bank-aid plan. But they said at least one issue is back on the table: putting bank rescue loans on equal footing with government bonds held by private investors. Germany has insisted that official loans should have a preferred status, meaning they shouldn't suffer losses even if private bondholders are forced into a restructuring.

Some analysts have blamed this prospective subordination of private creditors as contributing to the retreat of Spanish bond markets since the bank-bailout plan was announced 10 days ago. Others argue investors should assume official lenders will have preferred status anyway....putting the ESM on equal footing with regular bondholders would only resolve part of the problem—assuming that investors would actually believe a statement to that effect by euro-zone leaders, said Guntram B. Wolff, deputy director of Brussels-based think tank Bruegel.

The much bigger issue remains the country's growing debt load, he added, for which no institution has offered a credible solution so far. Spain's demand for direct capital injections for its banks rather than lending the money first to the government is being supported by the European Commission, the EU's executive, and some other EU governments, but is still being resisted vehemently by Germany, officials said. One EU official, however, said that "it is still early days" and that the exact structure of the aid hadn't been decided yet.

World leaders meeting at the weekend’s G8 summit in the US are to focus heavily on the European crisis Saturday, after President Barack Obama aligned himself with the new French president’s drive for more economic stimulus. ...AFP - Leaders of the world's most powerful nations were to focus their attention on Europe's economic woes Saturday after President Barack Obama threw his weight behind French calls for more pro-growth policies. Obama set the stage for a fractious G8 summit here by forging an alliance with new French President Francois Hollande over the need to jolt Europe back to growth. Fearing Europe's economic crisis is poised to worsen -- with dangerous repercussions for the US economy and perhaps his chances of re-election -- Obama weighed in, risking the ire of German Chancellor Angela Merkel who has championed an austerity-first approach. Shortly before welcoming Merkel and other leaders to the famed presidential retreat outside Washington, Obama noted Friday that events in Europe held "extraordinary" importance for the United States. The G8 needs to discuss "a responsible approach to fiscal consolidation that is coupled with a strong growth agenda," he said. To kick-off the summit a tie-free Obama greeted leaders shortly after dusk Friday at the threshold of his wood cabin for an informal dinner that lasted more than two hours. But the dressed-down atmosphere did little to relieve tensions, which have been stoked by the belief that two years of painful cuts demanded by Germany and others have undercut Greek growth and made recovery more difficult. In what may have been a telling moment, Obama greeted Merkel at his Laurel Lodge with a cordial: "How've you been?" When her response came: a shrug and pursed lips, Obama conceded: "Well, you have a few things on your mind." Publicly European leaders have attempted to smooth over the splits within the G8, insisting austerity and stimulus need not be mutually exclusive. "We need to take action for growth while staying the course in terms of putting our public finances in order. Stability and growth go together, they are two sides of the same coin," European Commission chief Jose Manuel Barroso said ahead of the summit. But with Greece's fiscal crisis apparently approaching denouement, those good words may be sorely tested....
The euro zone crisis is set to dominate four days of intense diplomacy which began in Washington Friday morning and continued through a meeting of G8 leaders at the presidential retreat Camp David on Friday evening. Discussions will continue there on Saturday and on to a Nato meeting in Chicago.
In talks at the White House, only hours before the Camp David summit, Obama met the new French president, François Hollande, for a one-to-one conversation in which he explored the possibility of a new approach to the eurozone crisis based on a pro-growth, stimulus strategy. Obama has been pressing for such a strategy for the past three years and has a potential ally in Hollande.
The White House welcomed what it sees as a change in the debate since Hollande's election that tilts the balance slightly more in favour of a growth strategy. The French president is proposing an EU-wide financial transaction tax (FTT) that could raise up to €57bn a year that could be used to stimulate the 27-nation bloc. After meeting Obama, Hollande was scheduled to meet David Cameron in Washington before flying to Camp David.
However on arriving in the US, Cameron said: "On the financial transactions tax I'm very clear. We are not going to get growth in Europe or Britain by introducing a new tax that would actually hit people as well as financial institutions. I don't think it is a sensible measure. I will not support it."

Joseph Daul, Chairman of the EPP Group - Daul, took note of the election of Francois Hollande to the Presidency of the French Republic, and said he hoped that France continues to meet its European commitments, including the Fiscal Pact Treaty. The Chairman of the main European Parliamentary Group (center-right) congratulated the outgoing President, Nicolas Sarkozy, for his remarkable commitment to Europe, including during the French Presidency of the Union and in managing the debt crisis. "Nicolas Sarkozy has, in close collaboration with German Chancellor Angela Merkel, and with all the European partners, taken the measures required to address national public finances and restore confidence in the ability of Europe to emerge of the crisis. He also had the courage, domestically, to make fundamental reforms in the areas of pensions and higher education, among others. These reforms will serve his country well". Joseph Daul believes that the essential growth policy which must be implemented alongside the policy of sound management of public finances, should not result in additional spending as "we no longer have the means."

IN  GERMANY...(THE IVth Reich) : The governing Christian Democrats and the opposition Social Democrats (SPD) are neck-and-neck in opinion polls. The CDU and its struggling coalition partner, the Free Democrats, look set to lose their majority in the state legislature.But the SPD and the Greens could also struggle to muster a majority. The vote comes ahead of another vital electoral test for Mrs Merkel - elections in Germany's most populous state, North-Rhine Westphali....The collapse of the liberal FDP in recent opinion polls could deprive Mrs Merkel of her coalition partner in federal elections due in 2013. The party has now lost all its seats in five state legislatures. The vote in Schleswig-Holstein is seen as hinging on whether the Free Democrats can achieve the minimum 5% of the vote needed to gain representation. In the latest state election, in Saarland in March, the FDP only won 2% of the vote. Early polling in Schleswig-Holstein indicated the FDP would fail to reach 5%....But the latest surveys suggest they could just scrape in.

Another deciding factor could be the performance of the new Pirate Party, which looks likely to win seats in the state parliament....The party, which campaigns on "digital rights" issues, has already pulled off a string of surprise state election successes, winning seats in Saarland, as well as in Berlin last year.

However, a party representing the state's small Danish-speaking minority, which has guaranteed representation, could also help the SPD and the Greens to form a government.

Joseph Daul, Chairman of the EPP Group, welcomed the decision of the Greek people to entrust Nea Demokratia with the most votes in today's elections. The Chairman of the EPP Group said: "Greece is an indispensable and undeniable part of Europe. We recognise there will be difficulties in creating a new government in Greece, according to election results so far. However we wish the Chairman of Nea Demokratia Antonis Samaras success in the difficult negotiations to form a coalition government and we support all of his efforts towards guaranteeing the European course of the country and bringing it back on the path of economic recovery and growth."

"The notion that you can renegotiate the pact from top to bottom and take substantial elements out of the text is a pipe dream,"

Eurozone finance chairman Jean-Claude Juncker has backed the idea of boosting the European Investment Bank (EIB)....It is one of several measures demanded by the leading French presidential candidate Francois Hollande to boost growth in the eurozone.

Mr Hollande has said he wants the measures added to newly agreed limits on European governments' borrowing.

However, Mr Juncker poured cold water on the idea that the "fiscal compact" could be amended.  Despite his opposition to renegotiating the fiscal rules, Mr Juncker appeared to offer an olive branch in a speech in Hamburg on Monday, by backing Mr Hollande's idea that the EIB could play a bigger role.

Mr Juncker said that the bank's capital - its buffer against loan losses - could be increased by 10bn euros ($13bn; £8.1bn), which would increase its lending capacity by several times that figure.

The EIB is jointly-owned by the 27 EU nations - including the UK - and finances infrastructure, small and medium businesses, and green projects among other things.

Mr Hollande is ahead of the incumbent President Nicolas Sarkozy in opinion polls, having already narrowly beaten him in the first round of voting a week ago...The other pro-growth measures called for by Mr Hollande include:

1 - the introduction of Europe-wide government bonds to finance infrastructure investment:

1 -  - a financial transactions taxa reallocation of unused structural funds in the European Commission budget

If elected, Mr Hollande has said he would veto ratification of the fiscal compact - which was agreed by EU governments, except the UK and Czech Republic in March - unless some of his demands were met.

The chief executive of market analysts RANsquawk :"The eurozone is being skewered by stubbornly high inflation and rising unemployment. Even ignoring the small matter of the debt crisis, the eurozone's fundamentals are once again looking increasingly sketchy. While in Spain there is a growing danger of unrest as popular frustration boils over at the new conservative government, even in buoyant eurozone economies, inflation is eating away at purchasing power. Any hope of consumers spending their way out of the dip has just faded further. In many of the 17, the numbers are conspiring to make economic output stagnate or contract. The increase in unemployment had been expected, and there was a sense of grim inevitability about these numbers". Unemployment figures like any stats are only as good as the accuracy of the source data. For instance, the figure in the UK is apparently 2.8 million with 29.12 million in work. That is out of an official 62 million population which is important because those not retired or at school etc not included in the 62 million are in effect unaccounted for. This is serious all over Europe because the population according to the people who really know through footfall count and accurate essential sales such as national food retailers like Sainsburys said that in 2007 (The Independent) they estimated the UK population at 78-80 million. Which means that there are not 2.8 million unemployed in the UK today at all, there could actually be in the region of 20 million technically. Whether unemployed or unaccounted for its a deeply worrying thought when one thinks this could be typical of what's happened all over Europe. What is alarming is that the natural self-sustaining model of capitalism has been severely undermined by the socialist ideology of make believe. And if all those unaccounted for people were found and ejected from all European countries there would be no unemployment, no housing shortages, no strain on infrastructure and so on. There would also be no internal threat of cultural destruction from Islam, no African ghettos in our cities, less crime, less strain on social services, more resources for indigenous populations etc. And most importantly if people were given their country's back again they might begin to believe in them, themselves and work and fight for their own futures. Isn't it a shame that the EU Technocrats can't 'fix' unemployment figures like that have the debt crisis, and for every Euro they print and create on a computer they repatriate an ill-suited / illegal immigrant. But our leaders know best I suppose, they know what they are doing. 17 million unemployed - yes a direct result of the EUSSR policies that kill off any competitive edge we could have, whilst at the same time paying the EU elite massive amounts and pensions the rest of us could not even dream off.

Meanwhile some European banks have indicated an intention to repay their LTRO money. The pundits on CNBC were baffled. ...Obvious really.... What these banks so desperately need is not limitless credit which they don't want to pass on anyway (except of course to their own sovereigns, in so far as they are pressured to do that) but real money invested in them from outside Europe. In other words it's a ploy to lure in some Asian/American/South American cash. The repayments are presumably being made from the profits they have generated from gambling with the ECB credits on spreads/commodities etc. Just as we all knew they would.http://www.scribd.com/arbitraj/

Italians have low personal debt, the second biggest manufacturing economy in Europe and Berlusconi claims the restaurants in Rome are full. So why is Italy now at the centre of the euro zone crisis? -- I say: could it be that according to the Ribbentrop -Molotov pact of 1939, the time has come for Germany to take over Europe after the Russians became the owners of the European energy capacities? It certainly looks this way !!

There is an "implanted fake problem" in the Italian business environment that prevents growth. Italy scores low in the World Bank indicator of how easy it is to do business – 80th place . The problem is bureaucracy and sluggishness of the justice system in courts to clear financial and business matters. People say: despite all the problems Berlusconi made a fortune and built a big business. The state and tax system never helps business; they are an obstacle to be overcome. It's remarkable that despite all of this Italian firms still do so well. There are also entrenched special interests that hold a monopoly over certain services, such as lawyers, notaries and all services that business need to operate and the state and Italy has no independent state service like France, there is too much vested interest. If Italy fails to repay its debts the impact would be far worse than if Greece defaults as it has a much greater overall level of debt, meaning its creditors, mostly European banks, would be in serious trouble. The immediate problem for Italy is in the bond market. The bond markets are essentially the trade in government debts and Italy's is among the largest at around €1.9tn. The yield on the price of government Italian bonds has risen sharply – this is equivalent to the interest rate charged to the Italian government to borrow money.

ATHENS—Greece was paralyzed by a massive two-day strike Wednesday as groups ranging from civil servants to pharmacists and bakers walked off the job ahead of a key parliamentary vote Thursday on new austerity measures. Across the country, public services were frozen, with central and local government offices closed, schools and courts shut, and hospitals operating at bare minimum staff levels. A couple walks by pilling garbage during the second week of a strike by municipality workers and garbage collectors in Athens on Wednesday. Transport services were disrupted as ferry operations were suspended by a dockworkers' strike, while national rail services ground to a halt, and Greece's two major airlines—Olympic Air and Aegean Airlines canceled dozens of flights owing to a 12-hour walkout by air traffic controllers. Tens of thousands of Greek retailers and small businesses joined in, shutting their shops in protest over recent tax hikes and government cuts that have pushed the country deep into recession and led to a dramatic rise in the number of businesses declaring bankruptcies. The 48-hour strike, called by private-sector umbrella union GSEE and its public-sector counterpart ADEDY, is the second time this year that the two unions have called a two-day walkout over government austerity measures. It follows weeks of almost daily strikes, demonstrations and sit-ins, as well as a two-week-long protest by municipal workers that has left uncollected garbage piling up on the streets of Athens and other cities. "We have reached the limits of our endurance and, what is worse, is that there is no ray of hope," said Stathis Anestis, spokesman for GSEE. "We want to send a message that these austerity policies have been a catastrophe for Greece." Under pressure from its international creditors, Greece's government this month submitted legislation that would further cut public-sector jobs and wages, slash pensions for high-income earners, curtail collective-bargaining rights for workers and enact a new levies on taxpayers, among other things. On Thursday, Parliament will vote on the bill just days before a Sunday summit of European leaders that is expected to produce a comprehensive solution to the bloc's debt crisis, and which will also decide whether to release badly needed aid for Greece. At stake is an €8 billion ($11.0 billion) tranche of aid from the European Union and the International Monetary Fund that Greece needs in the next few weeks. The government has said that without the funding, it will run out of money by mid-November.

The European Central Bank has moved to halt Europe's runaway debt crisis by pledging to buy government bonds from Italy and Spain. The move to prop up Europe's struggling nations came after a day of frantic discussions between the finance ministers of the world's leading economies. Markets open for the first time since Standard & Poor's decision to cut the US's credit rating from AAA late on Friday. In a statement, the ECB said it welcomed announcements by Spain and Italy of "new measures and reforms" aimed at the financial problems and urged both governments to roll them out swiftly. The agreement of the bank's policy-making governing council is a watershed moment for the ECB. The central bank has so far insisted that the main responsibility for acting lies with national governments. But last week a more modest bond buying effort failed to halt the European slide. The ECB said it had taken note of a statement by France and Germany released on Sunday stressing their commitment to European financial reforms. Silvio Berlusconi's government cobbled together an emergency austerity package for Italy late on Friday to placate the bond markets. Italy's borrowing costs shot up last week amid fears that its debts have become unsustainable. The Tokyo Stock Exchange opened down 1.4% after the announcement, the first test of the move ahead of the opening of European and US markets. US markets also looked set to open down with futures traders betting the markets would open below Friday's closing prices.